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Low Emissions Economy

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Low Emissions Economy Low-emissions economy Summary of submissions Low-emissions economy Summary of submissions October 2018 The New Zealand Productivity Commission Te Kōmihana Whai Hua o Aotearoa1 The Commission – an independent Crown entity – completes in-depth inquiry reports on topics selected by the Government, carries out productivity-related research and promotes understanding of productivity issues. The Commission aims to provide insightful, well-informed and accessible advice that leads to the best possible improvement in the wellbeing of New Zealanders. The New Zealand Productivity Commission Act 2010 guides and binds the Commission. You can find information on the Commission at www.productivity.govt.nz, or by calling +64 4 903 5150. How to cite this document: New Zealand Productivity Commission. (2018). Low-emissions economy: Summary of submissions on draft report. Available from www.productivity.govt.nz/lowemissions Date: October 2018 Disclaimer The views set out in a submission are those of the submitter, and publication of those views does not associate the Commission with those views. The contents of this report must not be construed as legal advice. The Commission does not accept any responsibility or liability for an action taken as a result of reading, or reliance placed because of having read any part, or all, of the information in this report. The Commission does not accept any responsibility or liability for any error, inadequacy, deficiency, flaw in or omission from this report. This copyright work is licensed under the Creative Commons Attribution 3.0 license. In essence you are free to copy, distribute and adapt the work, as long as you attribute the source of the work to the New Zealand Productivity Commission (the Commission) and abide by the other license terms. To view a copy of this license, visit http://creativecommons.org/licenses/by/3.0/nz/. Please note that this license does not apply to any logos, emblems, and/or trademarks that may be placed on the Commission’s website or publications. Those specific items may not be reused without express permission. Inquiry contacts Administration Robyn Sadlier Website www.productivity.govt.nz T: (04) 903 5167 E: [email protected] Twitter @nzprocom Linkedin NZ Productivity Commission Other matters Steven Bailey Inquiry Director T: (04) 903 5156 E: [email protected] 1 The Commission that pursues abundance for New Zealand. Contents Background and introduction i Document purpose ii 1 Beyond the inquiry terms of reference 3 Moving beyond GHG emissions ......................................................................................... 3 International emissions are important ................................................................................ 3 Adaptation ............................................................................................................................ 3 Looking beyond 2050 .......................................................................................................... 4 2 Mitigation pathways (modelling) 5 3 Emissions pricing 8 Emissions Trading Scheme (ETS) versus a tax ................................................................... 8 Rethinking how the ETS might operate ............................................................................. 8 Pricing emissions as the centre-piece of a GHG reduction strategy ............................... 9 Trade in carbon credits ...................................................................................................... 10 Emissions Intensive Trade Exposed (EITE) entities ......................................................... 12 Treasury guidance and shadow prices ............................................................................. 13 4 Innovation 14 A need to do more ............................................................................................................ 14 Soil carbon as a mitigation option .................................................................................... 15 Phasing out fossil fuel exploration and use subsidies ..................................................... 15 5 Investment 17 Climate-related financial disclosures ................................................................................ 17 Low-emissions investment strategy .................................................................................. 17 6 Laws and institutions 19 Climate Change Commission and legislation modelled on the United Kingdom Climate Change Act ................................................................................................. 19 Maori participation and the Treaty of Waitangi .............................................................. 20 Representation explicitly provided for in governance arrangements............................ 21 7 Short lived and long lived gases 22 8 Policies for an inclusive transition 24 9 Land use 26 Including agriculture in the ETS with free units, those units withdrawn over time ....... 26 Point of obligation for agricultural emissions .................................................................. 27 Refining the ETS for forestry ............................................................................................. 28 Research ............................................................................................................................. 30 10 Transport 31 Phase out date for importing fossil-fuel vehicles ............................................................ 31 Price feebate scheme for imported vehicles ................................................................... 31 CO2 emissions standards .................................................................................................. 33 Responsiveness to fuel prices ........................................................................................... 34 Barriers to EV uptake ......................................................................................................... 34 Government procurement of low-emission vehicles ....................................................... 35 Road pricing (including internalising externalities) ......................................................... 36 Older vehicles in the fleet ................................................................................................. 36 International shipping and aviation .................................................................................. 36 A role for biofuels in reducing transport emissions? ....................................................... 37 Public transport .................................................................................................................. 37 11 Electricity 39 Neutral policy settings ....................................................................................................... 39 The Resource Management Act 1991 and renewable electricity generation ............... 40 Electricity Authority review of distributed energy resources (DER) and demand response (DR) ........................................................................................................... 41 Options outside the Electricity Authority’s Review ......................................................... 43 Bioenergy ........................................................................................................................... 44 12 Heat and industrial processes 45 Importance of Biofuels ...................................................................................................... 45 The Energy Efficiency and Conservation Authority (EECA) ............................................ 45 Giving Fonterra discretion to refuse milk supply ............................................................. 46 Cement ............................................................................................................................... 47 Carbon capture and storage activities (CCS) ................................................................... 47 Natural gas ......................................................................................................................... 48 13 Waste 49 Overarching regulatory framework for wastes ................................................................. 49 The waste disposal levy ..................................................................................................... 49 Including wastewater treatment plants in the ETS .......................................................... 50 14 The built environment 52 Does the New Zealand Building Code need to change, or is a high carbon price enough? .................................................................................................................... 52 Compact urban design ...................................................................................................... 54 15 Presenting the call for action on climate change 56 Background and introduction 1 Background and introduction The Government asked the Productivity Commission to identify options for how New Zealand can reduce its domestic greenhouse gas (GHG) emissions through transitioning to a low- emissions economy, while at the same time continuing to grow income and wellbeing. In response, the Commission released an issues paper to the public on 9 August 2017 inviting responses to 40 questions. The Commission engaged with a large and diverse group interested in climate change and mitigation policy. We completed over 120 engagement meetings
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